Whirlpool Corp /De/ Q1 FY2021 Earnings Call

Thank you, and welcome to our first quarter 2021 conference call. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; and Jim Peters, our Chief Financial Officer. Our remarks today track with a presentation available on the Investors section of our website at whirlpoolcorp.com. Before we begin, I remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Whirlpool Corporation’s future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K and other periodic reports. We also want to remind you that today’s presentation includes non-GAAP measures. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of results from our ongoing business operations. We also think the adjusted measures will provide you a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. At this time, all participants are in a listen-only mode. Following our prepared remarks, the call will be open for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I’ll turn the call over to Marc.

Thanks, Roxanne, and good morning, everyone. Before we discuss our first quarter business results, I'd like to take a moment to discuss the volatile industry dynamics and our decisive response plan. In the first quarter, global semiconductor and resin shortages amplified existing supply constraints, and thus impacted our product availability. Further, we are faced with rapidly rising inflationary pressures, primarily in steel and resins. To address these issues, we swiftly implemented the necessary actions to protect margins and product availability. We announced significant cost-based price increases in various countries across the globe ranging from 5% to 12%. Additionally, we reset our supply chain model to constrained-driven logic that constantly adjusts production based on component availability. I strongly believe that we have the right actions in place to protect our operating margins. These actions propelled our Q1 results and give us high confidence to significantly increase our full-year ongoing earnings per share guidance by 18% to a range of $22.50 to $23.50. Now turning to our first quarter highlights on Slide 5. We delivered strong revenue growth of 24% driven by sustained consumer demand and previously announced cost-based pricing actions. Additionally, we delivered record ongoing EBIT margin of 12.4%, the third consecutive quarter of double-digit margins. Further, we generated positive free cash flow of $132 million as a result of strong earnings and lower working capital levels. Lastly, we successfully delivered on our long-term growth debt leverage target of 2x. Turning to Slide 6, we show the drivers of our first quarter EBIT margin. Price mix delivered 575 basis point of margin expansion driven by reduced promotions and previously announced cost-based pricing benefits. Additionally, we delivered margin improvement of 375 basis points from net cost related to a carryover impact of structural cost takeout actions and higher volumes as we begin to compare against the impact of COVID-19 in the prior year. These margin benefits were partially offset by raw material inflation, particularly steel and resin, resulting in an unfavorable impact of 225 basis points. Lastly, increased investments in marketing and technology and continued currency devaluation in Latin America impacted margins by a combined 125 basis points. Overall, we're very pleased to be delivering on our long-term EBIT margin commitment, and we're confident this positive momentum will continue to drive outstanding results throughout 2021. And now I'll turn it over to Jim to review our regional results.

Thanks, Marc, and good morning, everyone. Turning to Slide 8, I will review our first quarter regional results. In North America, we delivered 20% revenue growth driven by continued strong consumer demand in the region. Additionally, we delivered another quarter of record EBIT margin driven by strong volume growth and the flawless execution of our go-to-market actions. Lastly, we continue to optimize our supply chain operations, resulting in modest sequential share gains. The region's outstanding results continue to demonstrate the fundamental strength and agility of our business model. Turning to Slide 9, I'll review our first quarter results for our Europe, Middle East and Africa region. Strong demand and share gains in key countries drove a third consecutive quarter of double-digit revenue growth in the region. Additionally, the region delivered year-over-year EBIT improvement of $36 million led by increased revenue and strong cost takeout. These results again demonstrate the effectiveness of our ongoing strategic actions. Turning to Slide 10, I will review our first quarter results for our Latin America region. Net sales increased 18%, with revenue growth excluding currency of 35%, led by strong demand across Brazil and Mexico. The region delivered very strong EBIT margins of 8.5% with continued strong demand and the early impact of cost-based pricing actions offsetting significant currency devaluation. Turning to Slide 11, I'll review our first quarter results for our Asia region. In Asia, we delivered strong year-over-year net sales growth led by demand across the region and share gains in China. Additionally, we delivered significant EBIT expansion across both India and China led by go-to-market and continued cost productivity actions. However, uncertainty remains as COVID-19 cases continue to surge in India. Turning to Slide 13, Marc and I will discuss our revised full-year 2021 guidance. I will now turn it over to Marc to begin.

Thanks, Jim. So while the macroeconomic environment remains uncertain, we are confident that sustained strong consumer demand and our previously announced cost-based pricing actions will offset the impact of global supply constraints and rising input costs. We are raising our guidance for net sales growth from 6% to now 13%, and EBIT margin from 9% to now approximately 10%. In addition, with higher earnings, we now expect to deliver free cash flow of approximately $1.25 billion instead of $1 billion. Finally, we're also raising our EPS guidance significantly to $22.50 to $23.50, a year-over-year increase of 25%. Turning to Slide 14, we show the drivers of our revised EBIT margin guidance. We expect 600 basis points of margin expansion driven by price mix, as we continue to be disciplined in our go-to-market strategy and capture the benefits of our previously announced cost-based pricing actions. We continue to forecast net cost takeout to favorably impact margins by 150 basis points as we realize the carryover benefits of our 2020 cost reduction program and ongoing cost initiatives. The global material costs inflation, in particular, in steel and resins, will negatively impact our business by about $1 billion. We expect cost increases to peak in the third quarter. Increased investments in marketing and technology and unfavorable currency primarily in Latin America are expected to impact margins by 75 basis points each. Overall, based on our track record, we're confident in our ability to navigate this uncertain environment and deliver approximately 10% EBIT margin. Now I'll turn it over to Jim to highlight our regional industry and EBIT margin expectations.

Thanks, Marc. Turning to Slide 15, we show our updated industry and regional EBIT guidance for the year. We have slightly increased our global industry expectations to 5%, reflecting the demand strength in North America. We have updated the EBIT guidance of our North America and Latin America regions to reflect the benefits of pricing actions and continued demand strength. This brings our EBIT guidance for North America to 15.5% plus and Latin America to approximately 8%. Lastly, in March, Galanz launched its formal partial tender offer for a majority stake in Whirlpool China. Our EBIT guidance for Asia assumes Galanz's partial tender offer is successfully closed in the second quarter. Based on this assumption, we would expect to see approximately 7 months of Whirlpool China revenue and EBIT removed from the region's results. This is approximately $300 million in net sales and approximately $15 million of EBIT loss. With the deconsolidation of the Whirlpool China business and continuation of our profitable India business, we anticipate an increase in Asia's EBIT margin to 5% plus. Turning to Slide 16, we will discuss the drivers of our 2021 free cash flow. With expectations for stronger top-line growth and improved EBIT margins, we increased our cash earnings guidance by $250 million. From a working capital perspective, we expect to see inventory build throughout the year as we compare against record low levels in 2020 and account for ongoing bottlenecks in our supply chain. Lastly, we now expect $150 million from the sale of a majority of our shares in Whirlpool China, in addition to the continued optimization of our real estate portfolio. Overall, we now expect to drive free cash flow of approximately $1.25 billion or 5.7% of sales in line with our long-term goal of 6%. Turning to Slide 17, we provide an update on our capital allocation priorities for 2021. We continue to expect to invest over $1 billion in capital expenditures and research and development, highlighting our commitment to driving innovation and growth in the future. Additionally, with a clear focus on returning strong levels of cash to shareholders, we increased our dividend for the ninth consecutive year. Also, we have increased our share buyback program by $2 billion, bringing our remaining authorization to $2.4 billion. Lastly, we have delivered on our long-term gross debt leverage goal of 2x. Now on Slide 18, I'll turn it back over to Marc to summarize our key messages.

Thanks, Jim, and let me just recap what you heard over the past few minutes. We are highly confident in our ability to manage through the supply constraint and cost inflationary environment. We’ve consistently demonstrated our ability to be agile, take decisive actions and deliver strong operating results despite challenging market conditions. I firmly believe that we have the right actions in place to protect our operating margins, which is once again demonstrated in our record Q1 results. With increased demand and price mix expectations, we significantly increased our guidance for revenue, EBIT, earnings per share, and free cash flow. Lastly, we remain unwavering in our commitment to drive strong shareholder value and return cash to shareholders. Now, we will end our formal remarks and open it up for questions.

Your first question comes from Michael Rehaut from JPMorgan. Your line is open.

Thanks. Good morning, everyone and congrats on the results.

Thanks a lot, Michael.

My first question is about the impressive progress in North America. You mentioned that improvements in the supply chain have contributed to some modest market share gains. Could you discuss your volume growth and how it compares to the market, particularly in relation to AHAM shipment growth? Also, how do you view your excess backlog, which was around 7 to 8 weeks at the end of last year? Have you made any progress in this area, and considering the ongoing supply chain challenges and significant industry growth, do you anticipate that the backlog will remain high or be extended by a quarter?

Michael, it's Marc. Let me address both of your questions. Firstly, we are very pleased with the 20% growth in Q1, which indicates a strong momentum compared to Q4 and Q3. However, it's important to note that while we gained a moderate share sequentially in Q1 compared to Q4, we have not gained share on a year-over-year basis. We have stopped providing unit volumes for a reason, but that 20% growth includes a healthy price mix component, which aligns with our overall performance. There is also genuine underlying growth. The decision to stop discussing volume was influenced by our comparisons with AHAM numbers that include significant calendar variations, as well as complexities related to model classifications like T5, T6, and T7. Currently, we feel confident about our Q1 run rate in both volume and revenue and believe we can maintain our growth relative to the market throughout the year. Regarding the backlog, if I understand your question correctly, you are asking if we are one quarter away from resolving it. The short answer is no. To elaborate, in our January earnings call, we mentioned having about 7 or 8 weeks of order backlog that peaked around October and November last year and began to moderate by January. We anticipated reducing that backlog significantly, motivated by consumer demand for our products. However, there have been a few developments since. Firstly, consumer demand has not only remained strong but has actually increased, which led us to revise our full-year industry expectations. It's important to note that these full-year industry numbers reflect constrained shipments, while the true consumer demand is likely much higher than the 6% we currently project. We are facing two major supply chain events: the Texas winter storm affected petrochemical production and resins, and the ongoing semiconductor shortage has posed challenges in Q4 and Q1. Although we have implemented strategies to mitigate these effects, some impacts remain unavoidable, especially with significant factories affected by the Texas storm and a fire in Japan. Consequently, the combination of a constrained supply chain due to COVID, semiconductor shortages, and resins facing strong consumer demand has placed stress on our systems. As a result, backorders will likely remain elevated for some time. As of now, it is difficult to predict, but we anticipate that Q2 and Q3 will show similar elevated levels, with possible moderation in Q4. I hope this provides a clearer picture of the situation regarding the supply chain and backlog.

And your next question will come from Sam Darkatsh from Raymond James. Your line is open.

Good morning, Marc. Good morning, Jim. How are you?

Very good. Good morning, Sam.

Good morning, Sam.

I have two questions regarding raw material inflation guidance. First, thinking about the fiscal '22 RMI, if all commodity prices were to stay unchanged from this point onward, what would your estimate for fiscal '22 RMI be? Secondly, you had an impressive price versus RMI spread in the first quarter, with a 3.5-point difference between 5.75% and 2.25%. How do you anticipate that spread will look in Q2 and Q3, especially considering the extended lead times in the industry? I would expect that spread to continue. Could you share your thoughts on those two metrics? Thank you.

Sam, good morning. It's Marc. I'll start by discussing raw materials, and then Jim can share his thoughts as well. I'm not going to comment on '22 since it's quite far away and there are many uncertainties surrounding it. However, I'll share our views on the current dynamics of raw materials. It's important to note that there's a significant difference between the overall levels of raw materials and the year-over-year increases. We anticipate a continued rise in Q2, with a strong increase in Q3, which may peak then before beginning to moderate. Nevertheless, even with this moderation, the overall raw material costs will still be substantially higher. This trend is expected to carry into '22. However, it's crucial to recognize that the last 10 weeks have seen considerable changes in raw materials, and we are not in a stable environment right now. Currently, our best scenario shows further increases in Q2, with Q3 peaking, and some moderation in Q4, but still at a very high absolute level.

Yes. I agree with Marc on this pattern we observe. When considering year-over-year changes, a significant portion of the materials cost we are currently experiencing inflation in will be reflected in the numbers. Therefore, as we look ahead to 2022, we are unable to provide any guidance at this time, and we anticipate remaining in a high material cost environment for a while. Regarding the transition from Q2 to Q3, the overall price mix aligns with our earlier guidance for the year. This indicates that while materials costs are somewhat lower due to seasonal factors, they will still pose challenges as the year progresses. However, we expect pricing to improve, becoming the main driver of the price mix, countering the reduced promotional environment, which is showing year-over-year benefits. Thus, we believe our price mix will remain stable throughout the year.

Sam, it's Marc again. I noticed your note this morning where you mentioned that if price can offset RMI, which is central to our discussion. I want to clarify that rather than just assuming, we have been successfully offsetting RMI with pricing in the first quarter, and we plan to continue doing so. This is why we projected a material negative impact of 5 points for the full year alongside 6 points of pricing. We are confident in this approach.

Your next question will come from Susan Maklari from Goldman Sachs. Your line is open.

Thank you. Good morning. And also congratulations on a great quarter. I know there's a lot of hard work going into that. My first question is just going back to the inflation point, can you talk to us a little bit about what changed since we heard from you at the end of the fourth quarter. You took a big step up going from the $250 million to $300 million to the $1 billion. Just talk us through what's different there? And then also, how should we think about the possibility that we get further changes as we move through the year? How confident are you in this $1 billion guide that you've given us now?

Yes. Susan, this is Jim. I'll begin and then let Marc add his thoughts. Regarding your second question about confidence, this is our current perspective based on the latest information available to us. We've updated our assessments, and we do not anticipate inflation to continue at the pace we've observed in the first quarter. In response to your first question, since January, we've seen a notable rise in steel prices, which many producers will likely discuss in the upcoming weeks. Furthermore, as Marc mentioned earlier, our supply chain challenges, particularly the shortage of resins along with factors such as the Texas storms and increasing oil prices, have contributed to higher costs in our resin sector as well. Therefore, steel and resins are the primary drivers of these costs, and this inflation spans across various components in our supply portfolio.

Yes, Susan, I want to reiterate what Jim mentioned. Our two largest components in direct purchases are steel and resin. Over the past eight weeks, there has been a significant increase in steel prices. In North America, prices have risen to $1,500, which is unprecedented. Although we do not purchase at spot prices, our contract structures mean we can't completely avoid the impact of spot trends. Additionally, resin, our second largest purchase, is affected by rising oil prices and supply constraints from Texas, which do not contribute to lower prices. When you combine these factors along with the cascading effects on strategic components from our suppliers who also face increased steel costs, it leads to a substantial change. Regarding your question about confidence levels, I can only describe it as our best estimate at this time. I wouldn't label it as extremely pessimistic or optimistic; it's quite balanced. However, given the current uncertainties we've experienced over the past eight weeks, I believe a $1 billion estimate for this year seems reasonable.

Your next question will come from Eric Bosshard from Cleveland Research. Your line is open.

Good morning.

Good morning, Eric.

A little bit of clarity if you could. Price mix promotion, I know you put all of them in a bucket. But just interested in what the slope of the curve of each of those looks like and specifically what I'm trying to get a sense of is it seems like the North American price increases began in 2Q and I'm not sure when the peak benefit arrives there, but it seems like more of that's in front of us. And so I was a little surprised that the 575 basis points in that bucket in this first quarter feels like it can get larger than that as we work through the year. Perhaps there's some assumption about a change in promotions through the year. But if you could just expand a little bit on the assumptions within those three contributors, that would be helpful.

Eric, it's Marc. As you know, we don't usually break down the specifics of price mix, promotional activity, and SKU mix. It's typically a combination of all three factors. Over the last nine months, particularly in the last three quarters, we've seen significant positive pricing, which has been influenced by a better mix as we recovered from the immediate crisis in Q2. We've also seen a notable decrease in our promotional investments. In Q1, that effect is being enhanced by price increases that we've already implemented in some markets, although we still have a considerable impact from reduced promotions during this quarter. As we move into Q2 and Q3, since we scaled back on promotions last year, the year-over-year comparison will show less impact. This doesn't mean we're returning to our previous promotional levels; rather, it indicates there won't be an additional positive benefit. In Q2 and Q3, you'll start to notice a more substantial effect from the list price increases throughout the year.

The promotional plans for the 4th of July are being developed, and this may provide some insight into what the second half of the year could look like in terms of promotions. Can you share your plans, as well as those of the retailers? How do these plans compare to last year and historical trends?

Eric, as you know, we don’t provide guidance or insight on future pricing or promotional strategies. However, I would like to make a couple of general comments. For several years, our promotional strategy has been heavily focused on creating value. We initiate promotions when we can create value, and we refrain when we cannot. This is also related to my earlier comments to Michael about the supply chain; we will face constraints. It doesn’t make sense to promote products that we cannot produce. Therefore, while our promotional plans may always evolve, at this moment, we anticipate being supply constrained for a significant period, which means we don’t have very aggressive promotional plans.

And your next question will come from Mike Dahl from RBC Capital Markets. Your line is open.

Marc, Jim, thanks for the color so far, really helpful. My question is another one around costs. But thinking about logistics, you've maintained your expectation for net cost to provide 150 basis point net tailwind. We've obviously seen a lot of moving pieces on transportation and logistics as well, in terms of inflation. So can you kind of talk through underneath the surface, were there incremental changes that you were able to find additional productivity or cost to offset that. Just any sort of qualitative or quantitative commentary you could provide there would be great. Thanks.

Yes, Mike, this is Jim. I'll start by saying that we are experiencing increased logistics costs, similar to other manufacturers. However, we've managed to find benefits in other areas within our profit and loss statement. Our production volumes remain strong, reflected in our current revenue. Moreover, the cost-saving measures we implemented last year continue to provide us significant benefits, maintaining or exceeding previous levels. These factors are helping us to counterbalance the higher logistics costs we are facing.

And your next question will come from David MacGregor from Longbow Research. Your line is open.

Yes. Good morning, everyone and congratulations on all the progress and really kudos on navigating through these supply channel issues. It's impressive execution. I guess, I wanted to step back a little bit with my first question and just ask about with all the progress and growing in North American margins, what's your latest thinking in terms of a longer-term normalized margin for the North American business. And I guess, a lot of moving parts here and not a lot of forward visibility, but just trying to think about sort of a steady state with everything you'd be able to accomplish in terms of cost outs and everything else. How we should think about kind of a steady state normalized margin for the North American business.

David, it's Marc. If we take a moment to reflect on the past few years, whenever we achieve a new record margin in North America, the question arises about whether that is the peak. This question has been consistent for the last three to four years, and I believe our North America team has demonstrated impressively that we can continue to push further. We are now raising the full-year margin guidance to over 15.5. I think the team will work to show how much higher we can go over time. Of course, with many moving parts and significant elements involved, we will need to reassess what a long-term steady-state margin target should be for North America. However, I can say that the progress we've made in the last couple of years has certainly encouraged us to reconsider what steady-state margins could look like. I would expect that during the next investor meeting, which we will schedule appropriately, we will provide insights into our long-term margin guidance.

And just to add to that, David, I think the one thing that I like to highlight for folks too, that you would have seen in 2020, in Q2 with North America is we had a significant volume loss and our margins still stayed above 12% in there. So to Marc's point, I think we have a very healthy business there that can now deal with many of the volume shifts and the volatility in other areas. And as we look forward, we expect that to continue to be a significant contributor.

Okay, good. And the second question for me is just with regard to Europe. And can you just talk about some of the progress over there and what you may have been able to achieve recently in terms of new listings and price increased traction, and so on so forth. I thought the incremental margins seemed a little light. But overall, certainly directionally, the margins are moving in the right direction. So can you just talk about some of the elements of your progress there?

Yes. David, first of all, Q1 once again demonstrated significant year-over-year improvement. It's important to note that Q1 tends to be the weakest quarter in Europe. We haven't made a profit in Europe during Q1 for the past three years, but this time we did, although it is not at the same level as in Latin America or North America. Nonetheless, it represents a profit and a remarkable year-over-year increase. The 2.5% target we set for this year aligns perfectly with our turnaround plan. While this is not our ultimate goal, it is consistent with what we envisioned for our recovery strategy. Our European team has shown good cost discipline, but we are also facing similar cost inflation in Europe as we do in North America, though perhaps not to the same extent. Additionally, we made solid progress in regaining market share in several key countries during Q1. The European market has been robust in Q1, and we managed to grow our market share even against strong competition. As I've mentioned before, a major area where we need to continue advancing over the next few years is in developing the kitchen business in Europe. It typically takes longer to recover market share in this area, but we achieved some impressive successes in Q1 related to the kitchen business.

And your next question will come from Ken Zener from KeyBanc. Your line is open.

Good morning, everybody.

Good morning, Ken.

Good morning, Ken.

Your margins in North America are impressive, indicating a lot of hard work. I've discussed with clients that you have five brands in North America, while some competitors focus on a single brand. With the ongoing backlog and strong net pricing in the U.S., are you noticing any specific trends in certain categories? While I haven’t looked closely at AHAM, freezer sales are up, among other things. Is there a noticeable shift in the mix of products, like freezers, in light of homeowners enjoying their high equity levels? Are they spending more because of this? Can you provide insight into how increased home equity is affecting demand for your business? That's my first question.

Hey, Ken, it's Marc. So let me try to answer. First of all, on the mix of product and then maybe at a broader comment on our fundamental nature of demand, which we're seeing. The mix of product, of course, in Q2 and into some extent in Q3 last year, we saw a lot of COVID emergency products, okay? The microwave, the small fridge, or replacement product because of washers breaking down. That mix has gradually shifted and continues to shift toward a richer mix i.e., people are investing in the home versus disposable income and people are upgrading our investing. So it's not the COVID purchase anymore, quote-unquote. It's really a structural investment in the home. And that's a good thing to see. The broader comment, I want to make in the past, some people were referring to asking us well, what you see right now in demand is the pull forward. Frankly, I don't think pull forward describes adequately what's going on because pull forward implies there is a fixed amount of the years you get out in appliances, if you buy this year, you don't buy next year. That is not an adequate description. I think we need to think more in terms of appliances, from the consumer's perspective, how much use, how much mileage, how many cycles you get out in an appliance. And what last year showed with people spending so much time at home, the consumption was higher, literally the consumption. So what happened last year and what happens this year, the people spending so much time at home, the appliance consumption is higher. So it's not a pull forward, it's an accelerated use, which drives a lot of demand and which we expect will continue for quite some time.

It's interesting because I recently tried to fix my dishwasher, which wasn't draining. Fortunately, I was able to reset it quickly. It seems that at home, we experienced a positive trend throughout 2022. You've been upfront that domestic margins in the second half will normalize, likely falling below 15%. However, the situation for fiscal year 2022 still feels uncertain. Do you believe that the promotional activities we're comparing against are factored into next year’s or last year’s figures? In your view, is there any reason to expect that promotional activities wouldn’t return, considering the events of the past year regarding competitor capacity and market categories? It appears that your cost management strategies have really benefited your margins.

Let me start by discussing the demand. We believe that the demand trend is strong and sustained over multiple years, not just a temporary situation. Particularly in North America, there's a growing tendency for consumers to invest more in their homes, especially as people will spend more time at home due to flexible work arrangements. This trend is likely to increase investments in home improvement and lead to higher appliance usage. Additionally, the U.S. housing market is thriving, often described as the golden age of housing, and housing demand is expected to remain strong, if not grow, over the next few years. Therefore, we anticipate a prolonged period of robust consumer demand in the U.S. We've previously expressed confidence about mid and long-term consumer demand trends in North America, and I’m not concerned about it. Regarding the promotional environment, I want to reiterate that our policy remains unchanged. I can't speak on the actions of our competitors, which would be speculation, but given the current supply-constrained environment, you can expect us to take a cautious approach to promotions.

To build on what Marc mentioned, our strategy regarding promotions aimed at creating value remains unchanged and we expect it to stay that way. As we consider the various dynamics in the coming years, while it’s difficult to predict them precisely, we can highlight the actions we've taken in recent years, and our capability to manage these situations has improved. We previously discussed price increases based on costs that we implemented in 2012 and 2018, which we are also applying now. This demonstrates our continuous ability to adapt to our environment while maintaining and even expanding our margins.

And your next question will come from Curtis Nagle from Bank of America. Your line is open.

Thanks for taking my question. I’d like to shift the focus a bit to discuss a topic we haven't covered yet. I'm curious about changes in consumer behavior related to appliance purchases. The COVID pandemic has significantly pushed more shopping online. For some time now, the buying journey has been mostly online, occasionally involving a visit to the store. However, I'm interested in understanding the proportion of consumers who are now buying appliances exclusively online without visiting stores like Home Depot or Lowe's. How has that figure changed over the past year compared to a few years ago, and what are your predictions for its future direction?

Yes, Curtis, it's Marc. The online purchasing trends among consumers vary significantly from country to country. For instance, in China, online purchases are nearing 50%, while the U.K. is around 30%, and the U.S. has seen about 12% over several years. There was a notable increase last year. It's important to distinguish between purely online purchases and those that involve some mix, as nearly every consumer researches online before making a purchase. Purely online transactions have risen, especially in Q2 and Q3, but the growth in the U.S. has been less pronounced compared to other markets, largely because many retailers stayed open, unlike in other countries. I believe that while online sales won't entirely revert to pre-COVID levels, we will see a structural increase in the number of people buying online. I expect that this year, purely online transactions in the U.S. could reach about 15% to 20%.

Okay. Thanks very much, Marc, and good luck for the rest of the year.

Okay.

Thank you.

Thank you, Curtis. That wraps up our questions. I'll keep my closing remarks brief because we recently raised our guidance from $18.55 to a midpoint of $0.23, which is more than $4.50. You only make such adjustments if you're confident, and we certainly are. I hope that was clear in our discussion today. I want to take this opportunity to thank our employees and share some insights. We always set high expectations for our team, but their current performance and commitment are extraordinary. The impact of COVID is still very real; while the U.S. is beginning to recover, challenges persist globally. For instance, we had to shut down our factory in Manaus to support a local hospital that ran out of industrial oxygen. Additionally, India is experiencing a severe COVID wave, and we had 576 colleagues diagnosed positively in April. This brings significant pain and anxiety to many of our employees. Meanwhile, the supply chain constraints add an immense amount of stress to our organization. I want to assure our employees that their extraordinary efforts are recognized, and our organization is performing well. Thank you, everyone. Goodbye.

Thank you, everyone. This will conclude today’s conference call. You may now disconnect.